Question

Problem 15-5A Long-term investment transactions; unrealized and realized gains and losses LO C2, P3, P4 [The following information applies to the questions displayed below.] Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consists of the following. Available-for-Sale Securities Cost Fair Value 65,000 shares of Company A common stock $ 1,045,600 $ 930,000 40,000 shares of Company B common stock 350,750 340,000 40,000 shares of Company C common stock 1,381,500 1,329,875 Stoll enters into the following long-term investment transactions during year 2017. Jan. 29 Sold 20,000 shares of Company B common stock for $174,375 less a brokerage fee of $3,100. Apr. 17 Purchased 22,000 shares of Company W common stock for $475,000 plus a brokerage fee of $3,700. The shares represent a 30% ownership in Company W. July 6 Purchased 14,000 shares of Company X common stock for $261,125 plus a brokerage fee of $3,700. The shares represent a 12% ownership in Company X. Aug. 22 Purchased 100,000 shares of Company Y common stock for $650,000 plus a brokerage fee of $8,500. The shares represent a 51% ownership in Company Y. Nov. 13 Purchased 18,000 shares of Company Z common stock for $525,800 plus a brokerage fee of $6,500. The shares represent a 5% ownership in Company Z. Dec. 9 Sold 65,000 shares of Company A common stock for $1,030,500 less a brokerage fee of $4,100. The fair values of its investments at December 31, 2017, are: B, $170,750; C, $1,228,625; W, $390,500; X, $244,250; Y, $1,070,500; and Z, 565,600. Problem 15-5A Part 3 3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Stoll report on its December 31, 2017, income statement?

Answer 1

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	Part 1
	Available-for-sale securities on December 31, 2017
	Security	Cost	Fair Value
	20,000 shares of Company B common stock ($350,750/2)	$       175,375.00	$       170,750.00
	40,000 shares of Company C common stock	$    1,381,500.00	$    1,228,625.00
	14,000 shares of Company X common stock ($261,125+$3,700)	$       264,825.00	$       244,250.00
	18,000 shares of Company Z common stock ($525,800+$6,500)	$       532,300.00	$       565,600.00
	Total	$    2,354,000.00	$    2,209,225.00
	the amount Stoll should report on its December 31, 2017, balance sheet for its long-term investments in available-for-sale securities		$          2,209,225
	Part 2
Date	Account	Debit	Credit
Dec 31 2017	Fair Value Adjustment - AFS	$                34,100
	Unrealized Loss		$                34,100
	(to record unrealized loss on AFS)
Working:
	Beginning Balance
	Available-for-Sale Securities	Cost	Fair Value
	65,000 shares of Company A common stock	$          1,045,600	$             930,000
	40,000 shares of Company B common stock	$             350,750	$             340,000
	40,000 shares of Company C common stock	$          1,381,500	$          1,328,975
	Total	$          2,777,850	$          2,598,975
	Fair Value Balance as on Dec 31 2016		$             178,875	Credit Balance
	Fair Value Balance as on Dec 31 2017		$             144,775
	Debit to Fair Value Adjustment		$                34,100
	Part 3
	Only realized gain or loss is reported for AFS in income statement
	Stock Sold	Cost	Sale	Gain (Loss)
	20,000 Shares of B	$       175,375.00	$       171,275.00	$      -4,100.00
	40,000 Shares of A	$    1,045,600.00	$    1,026,400.00	$    -19,200.00
	Realized gain (loss)			$    -23,300.00